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The University of Prince Edward Island says it has put its internal research grants on hiatus for the upcoming school year as it tries to cover a multi-million dollar budget shortfall.

The school says it's short by about $5.5 million, and on top of that another $3.5 million for the Atlantic Veterinary College. By law, the school is not allowed to run a deficit, so that will mean finding $9 million to meet the shortfall within departments.

On Thursday the research office sent a notice to all faculties notifying them the grant won’t be reoffered for the 2013-2014 school year.

The cut will save a $125, 000, but the faculty association says it will hit some researchers hard.

The internal grants help pay for summer students, travel expenses to academic conferences and grants for new scholars.

"This is huge. This is perhaps the only research funding they can reasonably access and it's gone," said Nola Etkin, vice-president of the UPEI Faculty Association.

The group warns students will be hit the hardest by the loss of internal research grants.

"One research grant is one summer job for a student and it's an opportunity for them to do world class research and to end up in a graduate program or professional program," said Etkin.

The association said it anticipates university administrators will cover its $9-million shortfall through many small cuts. The arts department is already consolidating.

Some students say they wonder what's next.

"When you tend to decrease these allowances, it will affect the school and it's not really nice for students," said business student Menim Inyang.

"We have to try some new models. It's a change, but everyone has to go through change sometimes," said English student Alex Shinnan.

For now, the grants are on hiatus for just one year, but the school says the future of the program won't be known until after the budget is approved in May.

The school receives a total of $16 million in research funding each year.